The U.S. Department of Housing and Urban Development’s Federal Housing Administration (FHA) and Fannie Mae have gotten together to give owners of affordable housing rentals a break on energy efficient upgrades. As part of the Green Refinance Plus program [PDF], these owners will be eligible to refinance into new mortgages that include funding for energy- and water-saving improvements, along with other needed property renovations.
Under the terms of the program, FHA and Fannie Mae will share the risk on loans to refinance existing rent-controlled projects and additional funds to make energy-saving improvements. Typically, owners of affordable housing multifamily rentals refinance every 10-15 years–but funds can be difficult to come by for older apartment buildings. This program seeks to address that need while helping to improve the carbon footprint of these older properties nationwide.
FHA will insure up to an additional four-to-five percent of the loan amount, or an average of approximately $150,000 to $250,000 per loan, to provide funds for energy and water improvements that will reduce costs for both owners and tenants, such as energy efficient windows and Energy Star appliances, as well as other property renovations. Fannie Mae and HUD anticipate approximately $100 million in initial refinance volume through the Green Refinance Plus program, with an average loan amount of $3.5 to $5 million.
As part of the program, borrowers will obtain a “Green Physical Needs Assessment” completed by a qualified provider. This results of this specialized audit will identify key property improvements that will address rehab needs while producing the most energy efficient bang for the buck.
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